Initiating Coverage | 11th August 2011

PI Industries Ltd.
A DALMIA RESEARCH CENTRE REPORT

Harvesting Growth
PI Industries Ltd. (PII) has rightly placed itself for the next level of growth from the changing scenario of the Indian agriculture. The company has transformed itself to Indias only custom synthesis player, where more than 90% of the molecules are patented. Given the growing demand to feed a billion mouths, millions of whom transit to a superior diet every year, rising food prices and with the world's second-largest arable area the opportunities for PII are innumerable. At the CMP of Rs 984/-, the company is currently valued at P/E multiple of 12.3 and 8.4 of FY12E and FY13E earnings respectively indicating fair valuation. We have valued the company at Rs 1052/- which is 6.8% higher than the current price. We initiate coverage with a NEUTRAL recommendation.

Rating : NEUTRAL
CMP : Rs. 984.40 Bloomberg: PI IN Reuters: PIIL.BO
Face Value (Rs)** Equity Share Capital (Mn) Share Outstanding (Mn) Market Cap (Mn) Book Value / share Daily Avj. Volume 52 W High 52 W Low 10.00 1252.00 125.20 12324.7 187.91 24771 1209..40 388.00

Investment Rationale
Favourable dynamics of the agricultural sector The present dynamics of agriculture are quite promising for a good agriculture season in 2011-12. Governments strong focus and policy initiatives to enhance agriculture productivity by declaring higher MSPs of agriculture produce for 201112 as well as indication of normal monsoon are opening up the increased usage of agrochemicals by the farmers to protect their yields and increased productivity. Burgeoning custom synthesis order book of US$ 300 million Custom Synthesis business of PI entails dealing in custom synthesis and contract manufacturing of chemicals including techno commercial evaluation of chemical processes, process development, lab & pilot scale up as well as commercial production. Order book of US$ 300 million with tenure of execution ranging from 2-4 years, this business unit is expected to be the primary growth driver with strong revenue visibility. Riding on new product launch, to outperform the industry PIs agri-input business grew by 38% Y-o-Y in FY11 outperforming the estimated industry growth of about 15% for FY11 mainly on account of substantial growth of newly launched products over the next year as well as launch of couple of new products in the pipeline gives greater visibility in the agri-input area.

Shareholding pattern (%) Promoter Foreign Institutions Public & Others Relative Performance Analysis 63.77 16.16 0.67 19.51

Valuation:
Over the next three Net sales and PAT is expected to grow by 30% and 39% respectively. The EBIDTA margin is expected to improve from 17% to above 18.5% over the same period. At the CMP of Rs 984/-, the company is currently valued at P/E multiple of 12.3 and 8.45 of FY12E and FY13E earnings respectively indicating fair valuation. We have valued the company at Rs 1052/on combination of P/E, EV/EBIDTA, FCFF and FCFE on standalone basis (Contribution from subsidiaries are negligible) giving equal weightage to all, which is 6.8% higher than the current price. We initiate coverage with a NEUTRAL recommendation on this stock.
PE Band

Financials:
Particulars Net Sales EBIDT PAT EPS (Rs) P/E EV/EBITDA 2009 4,622 581 172 48.50 2.31 4.12 2010 5,428 815 354 49.91 5.63 4.22 2011 7,193 1,233 641 57.31 10.20 7.26

(Rs in Mn)

2012P 9,025 1,744 1,001 79.92 12.32 7.94

2013P 12,109 2,465 1,459 116.50 8.45 5.41

Chanchal Biswas
+91 33 66120525 chanchal@dalmiasec.com

** Stock Split from Rs. 10/- to Rs. 5/ from 18th August 2011.

Dalmia Research Center is the research desk of Dalmia Securities Private Limited (the Firm), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision
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Table of Contents

Investment Rationale Industry Outlook Financial outlook Valuation & Outlook Price Target Derivation Price Target Evaluation Risk & Concern Peer Comparison About the Company Business segment Financial Detail

3 6 9 10 11 12 12 13 13 14 15

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Custom synthesis - the main growth driver

With the expected growth trajectory of PI Industries, the custom synthesis division emerges as the main growth driver for PI as India continues to be the preferred destination for outsourcing custom synthesis and contract manufacturing related projects. With over 14 years of experience, PI has created a knowledge database in the custom synthesis business over several years to enable it to provide value added services and build trustworthy relationships with its key customers. It is associated with the leading innovators in the fine chemical industry in Europe and Japan. A key attribute of PI is its process research expertise and its ability to quickly scale up to commercial manufacturing. It has over the years proven these capabilities by developing more than 300 molecules at various stages of process development with up to 15 step chemical reactions. A primary differentiator for PI is the trust it enjoys with key innovator companies owing to its noncompete business model. Order book nearly 6 times the revenue The custom synthesis division has contributed around 37% to standalone revenue (excluding the polymer business), which is now poised to grow substantially over the next few years fueled by order book of US$ 300 million with tenure of execution ranging from 2-4 years. As on 31st March 2011, this order book in nearly 5.6 times of the custom synthesis business for FY11 revenue. From FY12E, as per the management guidelines, the custom synthesis division is expected to contribute around 40% of the total revenue. The Companys new manufacturing site located at the SEZ of Jambusar is presently under construction and will get commissioned in the last quarter of FY12. The commissioning of this additional capacity will help in catering to the additional demand and achieving the business growth in the coming years. With the commissioning of the new manufacturing facility at Jambusar, the multiyear contracts and sound order book position, it is expected to continue to contribute significantly to revenues and earnings of the Company. Growing margins Custom synthesis will remain a key growth driver for the Company. The business has demonstrated robust growth with high margins. The custom synthesis division commands the highest EBIDTA margin for PI across the business division at 21% and the management expects to increase it to over 25% in the next 2 years. With consistent performance in terms of timely product supply, quality and services, PI has established strong credibility with its customers thereby getting an opportunity to work on newly patented products, which offer better opportunities of growth and long term prospects for the company. Custom Synthesis workflow

Customer Enquiry

Secrecy Agreement

Feasibility Study

Process evaluation

Evaluation of cost estimation

Pilot scale trials

Quality Validation

Bench scale trials

Customer approval

Manufacturing & Supply

(Source: Dalmia Research + Company)

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Agri Input division to continue with growth trajectory

Over the years PI has shifted its core focus in Agri Input business by gradually shifting from being a generic manufacturer of the reverse engineered off-patent agro-chemical products to developing & having strong relationships with global MNCs and having exclusive marketing rights to distribute their products in India. The key strength of the company are One of the leading agrochemical companies in India. Over 45 years of experience in rural marketing. Business built on strong understanding of crop requirements and solutions. Developed some of the best brands in the industry that are leaders in their category. One of the worlds largest producers of generic molecules like Profenofos, Ethion, Phorate etc. Dedicated team for product trials to generate data, product evaluation and for registration. Has more than 25 years of association with large multinationals for some of the products in India. Pioneers in the introduction of granular formulation and the largest sellers in that segment.

Product Portfolio:
Agri input business has achieved a robust growth of ~38% on YoY basis in FY11 and will find it relatively easier to maintain and grow its margins given that several brands in our portfolio are segment leaders. There is also a concerted strategy to develop strong market positions where a majority of its brands are either #1 or #2 in their respective categories. As a result there is a premium created for the brands under the PI umbrella. An apt example for the same is Nominee Gold which is all set to become the leading rice herbicide in the country. Acceptance levels are high as the product is technically superior to all available alternatives.
Common Name Insecticides Alphamethrin 10 % EC Carbofuran 3% CG (encapsulated) Chlorfenapyr 10% SC Cypermethrin 10% EC Cypermethrin 25% EC Ethion 40 % + Cypermethrin 5 % EC Ethion 50% EC Imidacloprid 17.8 % SL Metaldehyde 2.5% DP Monocrotophos 36% WSC Phorate 10 % CG Profenofos 40%+Cypermethrin 4%EC Profenofos 50% EC Propargite 57 % EC Thiamethoxam 25 %WP RODEO DIAFURAN 3G LEPIDO Colt 10 Colt 25 COLFOSTM FOSMITE 50 JUMBO SNAILKIL 2.5 % Bait KADETT 36 FORATOX 10 Gr ROKET 44 EC CARINA 50 EC SIMBAA 57% EC MAXIMA 25 % WG Atrazine 50% WP Fenoxaprop - p - ethyl 10 EC Pretilachlor 50 % EC Thiobencarb 50% EC Bispyribac Sodium 10% SC Iprobenfos 48% EC Metiram 70 % WG Brand Name Common Name Brand Name Fungicides KITAZIN SANIT Herbicides SOLARO 50 JUPITER ALCOR 50 EC SATURN 50 % EC NOMINEE GOLD 10 % SC

Plant Nutrients Seaweed (Ascophyllum nodusum) BIOVITA

Seed Treatment Chemicals Imidacloprid 48% FS Imidacloprid 70 % WS Thiamethoxam 70 % WS DISPEL 48 FUNDA 70% WS MAXIMA 70% WS

(Source: Dalmia Research + Company)

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PI continues to evaluate newer molecules and are partnering with innovators for the same. The in-licensing model helps us to work on newer innovative products where we work extensively in the field promotion area, building on our knowledge base before looking to scale up to the next stage. There are 7-8 products in the pipeline with at least 2 new launches slated for launch in FY2012. With a portfolio of blockbuster products in-market and a pipeline of exciting new products, PI is poised to scale up its business this year. The focus will remain on driving growth through exclusive marketing rights for very promising products by lending the best distribution and marketing support. PIs track record thus far stands testament.

Portfolio of brand leaders and patented molecules

PIIL is one of Indias leading players in the Agri-Input industry, primarily dealing in agro-chemicals, specialty fertilizers, plant nutrients and seeds. Several brands of PII enjoy leadership across the industry in their respective categories. PI is the only Custom Synthesis business in the country where more than 90% of the molecules are patented or are at early stage of commercialization.

Unique business model with non compete business division

PI Industries Ltd. (PIIL) is following a business model which is unique in India and in such model initial scale-up might be slow but after achieving the critical scale, the growth will be exponential with decent margins since it is the critical supplier for most of the products it serves. PII operates in the Agri-input and Custom Synthesis business. These two divisions mutually complement each other wherein PII can get into an agreement to market a product in India, for which it is already contract manufacturing for the innovator company, if it feels that the product would be a success in India.

Strong distribution network

PII, a pan-India company has been in the business for more than 40 to 50 years. Company has all majority products, focusing on a variety of crops. To support the growth for agri Input business, it has got a strong distribution network to achieve the targeted growth with five zonal offices, 24 branches, 220 sales staff, 800 field staff, 3000 distributors and over 20,000 retailers. In terms of the custom synthesis business, it is 100% export-oriented business and is basically in the developed nations, where all the innovative companies are located, which is basically Europe, Japan, and bits of America.

Exit from non-core business to propel the operating margin

Companys strategy to concentrate on its core businesses of Agri-inputs and Customs Synthesis business is well focused with the divestment of the polymer business to Rhodia, S.A., a French multinational speciality chemical major. The deal includes transfer of all assets, people, plant facility, R & D capabilities, customer base and logistic network in India. The deal was concluded in April, 2011. The polymer business witnessed significant pressure on margins because of input-cost pressures. Post this transaction PII is completely focused on both high margin and highly scalable businesses. The proceeds from the sale transaction give it the flexibility to fund the growth plans for these businesses.

Capex plan to sustain high growth

The Companys new manufacturing site located at the SEZ of Jambusar is presently under construction and the first phase will get commissioned in the last quarter of FY12. The commissioning of this additional capacity will help in catering to the additional demand and achieving the business growth in the coming years. The overall capex is guided at Rs. 1250 mn for this facility in the next couple of years, out of which the company has already incurred Rs. 750 mn in the FY11 for expanding its existing facilities at Ankleshwar. The company is optimistic about funding its major portion of its future capex requirements through internal accruals on the back of robust growth in the future without expanding existing debt-equity ratio.

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Industry Outlook
Indian Agriculture in search of Second Green Revolution Agriculture is the main stay of the Indian economy as it constitutes the backbone of rural India which inhabits more than 70% of total Indian population. India needs second green revolution to bring food security to its growing billion plus population. Increasing population, high emphasis on achieving food grain self sufficiency, limited farmland availability coupled with pressure to increase yield per hectare and growth in horticulture and floriculture will derive the usage of agrochemicals in the future. Key segments India is the fourth largest producer of agrochemicals globally, after United States, Japan and China. The agrochemicals industry is a significant industry for the Indian economy. Stringent environmental norms in the West are causing production capacities in agrochemical segment to shift to developing countries like China and India. The agrochemical industry in India is different from the developed world for a number of reasons. Globally, herbicides constitute a large proportion of the demand. On the other hand in India, insecticides comprise 67% of the market. Currently, in India crops lost due to non-use of pesticides are estimated to be around USD 17 billion every year.

Pesticides consumption

Share of loss caused by different pests

(Source: DRC + Insecticides India Ltd.) Scope for growth India uses around 280 grams per hectare of pesticide, which when compared to Japan's usage of 11 kg per hectare is minimal. The foremost reason being, in India only 25-30 per cent of the farmers are aware of the use of pesticides. The avoidable crop losses due to pests in different crops vary from 20-90 per cent depending upon the crop and pest infestation. Per hectare consumption of pesticides in India is one of the lowest and has the potential to grow at scorching rate in the near future.

(Source: DRC + Insecticides India Ltd.)

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Growth Drivers

Today, Government of India is concerned about Food security and to increase food production. But, the question is how to achieve this? Is it possible without agro chemicals? Since the growth of the agriculture is linked to the monsoon and income of the farmer, we have seen the farmers have started to invest in agri-inputs and more specifically in the crop protection chemicals in the last two years. The Indian Agrochemicals Industry is expected to grow at 7.5 % over the next 3-4 years due to growing need for food grain to feed above 1 billion people. Even as India's population burgeoned by 17 per cent in the last 10 years, its farm output expanded at just half that rate. Despite growing demand for food, the land devoted to agriculture has dwindled in the last 20 years.
Indian Agrochemical Market Size (INR Mn) 2009 2010E 2011E 2012(P) 2013(P) 59840 65120 67200 72240 77658 Growth (%) 13.3 8.8 3.2 7.5 7.5 Sales (INR Mn) 4621 5428 7193 8913 12109 PI Industries Ltd. Growth (%) 13.9 17.5 32.5 23.9 35.9 Market Share (%) 7.7 8.3 10.7 12.3 15.6

(Source: The Hindubusinessline, Insecticdes India Ltd. and DRC) PI Industries, which is in the agri-business for more than 40 years and having exclusive marketing right for newly patented molecules have outperformed the industry continuously over the last three years. The market share of the company is growing steadily over the years and is expected to 15.6% due to companys initiative to shift towards the high margin patented molecule from the low margin generic molecule.

Key growth drivers include

Limited farmland availability and growing exports: India has ~158 million hectares of gross cultivated area and the scope for bringing new areas under cultivation is severely limited. Available arable land per capita has been reducing globally and is expected to reduce further. The pressure is therefore to increase yield per hectare which can be achieved through increased usage of agrochemicals. Indian agrochemical exports accounted for ~50% of total industry size. Growth in demand for food grains: India has 17% of the worlds population and less than 2% of the total landmass. Increasing population and high emphasis on achieving food grain self-sufficiency as highlighted in the FY11budget, is expected to drive growth. The pesticide consumption in India is just 3% of the global consumption leaving large scope for growth. Population Pesticide Usage

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Food Security: India is adding one Australia every year and it is estimated that by 2020, food grain requirement will be 300 million tonnes. The food grain production has nearly stagnated since 1996. In the last decade it has remained within the range of 200million tonnes to 230 million tonnes. With growing population. So, food grain production must increase by 5 million tonnes a year. At the same time it is also estimated that 20% of the area under food grains will shift to vegetables, pulses and chillies.

(Source: Economic Survey + DRC) Low consumption of food grains: The per capita consumption of food grain, presently quite low in India and is expected to increase as the income and number of middle class is likely to increase. There has been a sharp decline in per capita grain output as well as grain consumption in the economy as a whole. At increasing per capita income levels, an increasing amount of grain is consumed as animal products, so the total per capita grain consumption rises fairly sharply with rising income. The share of direct cereal demand in the household food budget does decline, but there is an absolute increase of total cereal demand and no decline in its overall share in the food budget. Low Yield: Indias crop yield is quite low in comparison to world. Ensuring food availability for the 1.15 billion people necessitates higher yield of the farm products. Country/ Yield USA India China Pakistan EU-27 World Wheat tons/hectare 2.99 2.91 4.74 2.65 5.37 3.01 Rice tons/hectare 7.94 3.19 6.59 3.64 6.49 4.22 Oil Seeds tons/hectare 2.79 0.96 2.13 1.36 2.69 2.07 Cotton Kgs/hectare 871 486 1315 697 888 733

(Source: FAS/USDA + DRC) The top three 43% of food grains production comes from U.P, Punjab & W.B. 47% of oilseeds production comes from M.P, Maharashtra, Rajasthan.

62% of cotton production comes from Maharashtra, Gujarat, A.P. Together, these states accounts for more than 70% of pesticides use in India. Pesticides use contributes to higher agricultural productivity in these states.

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Growth of horticulture & floriculture: Buoyed by 50% growth experienced by Indian floriculture industry in last 3 years, Government of India has launched a national horticulture mission to double production by 2012. Growing horticulture and floriculture industries will result in increasing demand for agrochemicals, especially fungicides.

Increasing awareness: As per Government of India estimates, total value of crops lost due to non-use of pesticides is around USD 17 billion every year. Companies are increasingly training farmers regarding the right use of agrochemicals in terms of quantity to be used, the right application methodology and appropriate chemicals to be used for indentified pest problems. With increasing awareness, the use of agrochemicals is expected to increase.

Financial Outlook
Growth to continue PIIs revenue is estimated to grow at a CAGR of 29% over FY11E-FY14E mainly on account of substantial contribution from custom synthesis business. The custom synthesis in FY11 contributed around 30% of the topline. From FY12 onwards, after the exit from polymer business, the custom synthetic business is expected to contribute around 40% to the topline and by FY14 it would be the same contributor as agriinput business to the topline.

EBIDTA and PAT margin to improve in FY12 The operating profit and net profit margin increased to 17.2% & 8% in FY11 from 13% & 3% in FY09 respectively, on account of improved margins in domestic agri-input, increased revenues from custom synthesis and exit from lower margin polymer compounding business, better capacity utilization and efficient overheads cost management. PIIs margins have seen an uptrend in the recent years and expected to improve further in FY12, backed by new product launches and improving product margins as well as exit from non-core business.

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ROCE and ROE are expected to continue growth In the last 3 years, PII has continuously raised its ROCE and ROE, on the back of robust growth and expanding margins, The Company has healthy return ratios with ROE & ROCE pegged at 31.6% and 27.3% respectively for FY11. The return ratios are expected to improve further in FY12E due to exit from non-core business. Debt Equity ratio to improve further The debt-equity ratio which is currently hovering over 1 is expected to cool off to 0.6 in FY12 due debt repayment of around Rs.1000 million from the proceeds of sale transaction of polymer business. In FY12 and FY13 additional loan of Rs. 250 million and Rs. 500 million will be sourced for the expansion plan.

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Valuation and outlook:

We estimate PI to post EPS of INR 79.7 and INR 116.50 in FY12 and FY13 respectively, on a standalone basis, as contribution from its subsidiaries are negligible. PI is currently available at 12.5x and 8.6x P/E of FY12E andFY13E, respectively. On EV/EBITDA basis, the stock is trading at 8.5x and 5.5x for FY12E and FY13E EBIDTA respectively. We have valued the company on combination of P/E multiple, EV/EBIDTA, FCFF and FCFE on standalone basis giving equal weightage to all. At our target price of INR 1052 per share, PI trades at 9x FY13E EPS. Even comparing with its peers - PI looks fairly valued at its current valuations. On the business front, our key expectations are based on solid business diversification both in products and markets. Product diversification is important as government regulation play a major role in the industry and ban on any product can affect sales significantly. PII offers this model of strong diversity in market and product and on the market diversification, with a strong distribution network spread throughout the country PI is sure make the new launches successful and withstand the uncertainties due to monsoons and regional seasonality.

Price target derivation

We initiate with 'NEUTRAL' recommendation on PII Industries Ltd. Our price target is based on FCFF & FCFE on standalone business with combination of P/E and EV/ EBIDTA multiple. Valuation 25% of weightage on P/E 25% of weightage on EV/EBIDTA 25% of weightage on FCFF 25% of weightage on FCFE Total standalone value CMP Upside (%) Our valuation methodology is based on following assumptions We have valued standalone business on DCF considering projections from FY12E FY16E and discounted for same period. We have considered Risk free rate: 8.5%, Expected market return: 16.0%, adjusted beta: 0.68 and cost of debt at 11.5%. Core business is valued on P/E and EV/EBIDTA multiple method, target P/E & EV/EBIDTA of 9x and 5x respectively on FY13E earnings and EBIDTA. Equal weights given to all the four method to arrive at the final Target Price. EBIDTA margins is considered at 18.8% in FY12E and FY13E and reduced to by 50 bps every year till FY16E. In Rs. 262 226 296 268 1,052 984 6.8

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Price target Evaluation:

FREE CASH FLOW CALCULATION
Cost of equity (%) Equity Return (%) Beta Risk-free return (%) Expected market return (%) Debt/Equity(X) Cost of debt (%) Cost of capital (%) Terminal growth rate Equity Face Value Y/E March CFO Marginal tax rate (%) Interest expended Capex FCFF Net borrowings FCFE 13.60 13.60 0.68 8.50 16.00 0.6 11.50 12.81 6.5 125.27 10 FY10
12 26 183 (346) (380) 260 (74)

FY11
7 23 182 (913) (946) (535) (1,441)

FY12E
32 23 172 (250) (256) 981 763

FY13E
214 25 240 (250) (94) (678) (714)

FY14E
1,224 26 232 (100) 1,066 721 1,845

FY15E
1,309 26 218 (100) 1,154 (85) 1,123

FY16E
1,511 26 188 (100) 1,364 (144) 1,267

FCFF
Terminal Value FCFF Discounting year PV NPV Less-Debt Add-Cash NPV for Shareholder NPV per share 16,350 1,807 295 14,839 1,185 17,197
(74) (1,441) 763 763 61 (714) 1 (628) (50) 1,845 2 1,430 114 1,123 3 766 61 18,464 4 11,087 885 (380) (946) (256) (256) (94) 1 (83) 1,066 2 838 1,154 3 803

23,010
1,364 4 15,049

FCFE
Terminal Value Less Debt FCFE Discounting year PV PV per Share NPV per share 1,071

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Peers Comparison:
Sales (Rs. Mn) United Phosp. Excel Crop Care Rallis India Sabero Organics Meghmani Organ. Jubilant Inds. Nag. Agrichem P I Inds. 28091.4 7022.8 10467.2 4127.2 8446.9 2470.1 5679.1 7185.6 NP Margin (%) 5.61 7.67 12.06 3.94 5.00 3.36 1.05 8.92 Op. Margin (%) 17.38 11.30 18.84 8.29 10.82 4.70 8.75 17.20 P/E EV/EBIDTA EV/Sales P/Bv D. Yield Market Cap. (Rs. Mn) 72806 2058 29623 4464 3356 1516 1719 9918

6.3 4.7 24.7 31.4 6.7 5.2 37.7 15.6

19.02 4.02 15.43 14.87 7.09 12.97 6.72 9.96

3.3 0.45 2.91 1.23 0.77 0.61 0.59 1.71

3.22 0.99 5.89 3.67 0.63 0.54 0.87 4.21

1.27 2.01 1.31 0.91 3.04 0 4.35 0.5

Risks & Concerns to our Target Price

Drop in realisation beyond our assumptions, increase in cost of raw materials will have major impact on profitability of the company. The pesticide demand is mainly linked to growth of the agriculture i.e. mainly dependent on monsoons. These vicissitudes of the monsoon and the act of God continue to play the main role in the pesticide industry. Any delays in the operational time frame of the companys new facilities in Gujarat (Baroda SEZ) would act as deterring factor for the companys growth plans. The presence of manufacturer of spurious product ( starting from pesticides to seeds) may have an impact on the sales anytime. Government policies on crop procurement and ban of certain pesticides may affect the financial position of the company.

About the company

PI Industries (PII) is a leading Indian Agri-input and Custom Synthesis company. Founded in 1947, it was earlier known as Pesticides India and was renamed PI Industries in 1993 to reflect its new diversified businesses. PII was set up by the late Mr. P P Singhal, as an edible oil refinery unit. It later ventured into the agrochemicals formulation business, which is currently its major revenue driver. In 1978, the company diversified into mining and mineral processing; this business was later hived off into a separate company, Wolkem India Ltd. PII also entered the energy metering business in the 1980s which was also was hived off into a separate company, Secure Meters Ltd. To mitigate risks relating to its exposure to cyclicality in the agrochemicals industry, PII diversified into polymer compounding in the 1990s. Also, in the mid-1990s, PII entered the CRAMS business, which currently accounts for nearly 33% of the companys revenues. From April 2011, the polymer business has been divested to Rhodia, S.A., a French multinational speciality chemical major. Plant Location: PII currently operates through three formulation and two manufacturing facilities as well as four multi product plants under its three business units across Jammu and Gujarat.

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Business Segment: PII is into the following two business areas namely Agri Input and custom synthesis

Major Products

Agri - Inputs

Custom Synthesis

Insecticides

Agro Chemicals

Fungicides Pharma

Intermediates
Herbicides

Plant Nutrients

Specialty

Chemicals

Agri-Input Business

PI is one of Indias leading players in the Agri-Input industry, primarily dealing in agro-chemicals, specialty fertilizers, plant nutrients and seeds. This venture is the flagship business (unit) for which PI enjoys tremendous brand recognition across several industry leading products. The Company has exclusive rights with several global Corporations for distribution in India and is constantly evaluating prospects to further expand its product portfolio. Given the inevitable surge in demand for food grain production in the agriculture sector, the opportunities for Argo-Chem Companies are innumerable. PI Industries is favorably positioned to contribute to the growth in this space by leveraging its long standing association with business partners and intensive network of distributors across India. Most of molecules that PII sell in India are In-license molecules, so the kind of molecule product that PII are dealing in and the new ones coming today in the market, easily they have life of not less than 15 to 20 years, before getting converted into generic. Custom Synthesis Business

The Fine Chemicals business unit of PI focuses on Custom Synthesis which entails dealing in custom synthesis and contract manufacturing of chemicals including techno commercial evaluation of chemical processes, process development, lab & pilot scale up as well as commercial production of fine chemicals which find application in agriculture, pharmaceutical, electronics, imaging, Printing, etc.. The Company has an impressive product portfolio as result of exclusive tie-ups with leading agro-chemical, pharmaceutical and fine chemical companies around the world. PI has made substantial investments in building state of art process research and manufacturing facilities of chemical intermediates and active ingredients with special focus on strong process R&D capabilities. This business unit is expected to be the primary growth driver with strong revenue visibility as India continues to be a preferred destination for outsourcing Custom Synthesis and contract manufacturing related projects. With exceptional growth opportunities in the offing this business segment is poised for great success. The company has built a very strong customer base comprising of leading chemical companies in Europe & Japan, and based on its strong reputation, the customer base is steadily enlarging. This is backed by world class R&D and Manufacturing facilities to service its customers.

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Financials (Standalone*)
*Contribution from subsidiaries are negligible

Profit & Loss A/C:

(In Rs. Million)

Year-end: March
Net Sales Growth (%) Total Expenditure Purchases of Goods Traded Cost of Raw Material RM as % of Net sales Operating Expenses Personnel expenses Administrative, selling & other expenses Research & Development expenses EBDITA Growth (%) EBIDTA (%) Depreciation Other Income EBIT Interest/Financial Charges PBT Total Tax PAT PAT Growth (%) PAT (%)

FY 09
4,621.8 22.9 4,206.6 241 2,726 59.0 249 395 488 49 581.0 87.6 12.6 111.7 7.4 469.3 222.8 246.5 74.6 171.9 20,527 3.7

FY 10
5,428.2 17.4 4,590.4 136 3,025 55.7 362 432 529 51 815.3 40.3 15.0 127.9 11.1 687.5 183.1 504.4 150.7 353.7 106 6.5

FY 11
7,193.0 32.5 6,255.5 205 4,294 59.7 487 551 664 55 1,232.7 51.2 17.1 152.4 7.3 1,080.3 181.9 898.3 257.2 641.2 81 8.9

FY 12 (P)
9,024.6 25.5 7,575.4 205 5,394 59.8 534 661 810 72 1,744.2 41.5 19.3 163.0 7.3 1,581.2 171.6 1,409.6 408.5 1,001.1 56 11.1

FY 13 (P)
12,109.1 34.2 9,939.2 205 7,306 60.3 584 793 972 79 2,465.0 41.3 20.4 173.0 7.3 2,292.0 240.1 2,051.9 592.5 1,459.4 46 12.1

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Balance Sheet:
(In Rs. Million)

Year-end: March Sources of Funds

Equity Reserves & Surplus Total Shareholders fund Total Debt Secured Loans Unsecured Loans Total Liabilities

FY 09

FY 10

FY 11

FY 12 (P)

FY 13 (P)

35.4 890.7 926.1 2038.4 1894.1 144.3 2964.5

70.9 1247.0 1523.9 1503.4 1053.2 450.2 3027.3

111.9 1913.5 2106.3 2484.0 1559.8 924.2 4590.4

125.3 2882.6 3088.8 1806.5 1594.5 212.0 4895.3

125.3 4195.4 4401.7 2527.7 2315.7 212.0 6929.4

Application of Funds
Gross Block Accumulated Depreciation Net Block Capital Work-in-Progress Investments Current Assets,Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Total Current Assets Less: Current Liabilities & Provisions Net Current Assets Total Asset Net Deffered Tax Liability Total Assets 1,042.2 922.6 41.9 301.6 2308.3 972.1 1336.2 3214.2 (249.70) 2,964.5 1,027.9 1,030.7 49.3 344.9 2452.8 1253.5 1199.3 3297.2 (269.90) 3,027.3 1,409.8 1,762.6 81.6 502.1 3756.1 1701.4 2054.7 4913.3 (322.90) 4,590.4 1,689.4 1,865.0 295.2 638.0 4487.7 2136.0 2351.7 5297.2 (401.90) 4,895.3 2,291.5 2,714.0 1,519.2 930.0 7454.7 3067.0 4387.7 7410.3 (480.90) 6,929.4 2578.2 796.1 1782.2 74.1 18.1 2912.3 920.4 1991.9 86.3 19.7 3591.2 1073.0 2518.2 320.7 19.7 3911.9 1236.0 2675.9 250.0 19.7 4161.9 1409.0 2752.9 250.0 19.7

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Cash Flow Statement:

(In Rs. Million)

Year End : March

PAT Depreciation Deferred Tax Other Income Inc/(Dec) in WC Cash from Operation

FY 09
171.9 111.7 32.7 (7.4) (292.6) (35.2)

FY 10
353.7 127.9 20.3 (11.1) 144.4 (108.1)

FY 11
641.2 152.4 52.9 (7.3) (823.1) (731.9)

FY 12 (P)
1,001.1 163.0 79.0 (7.3) (83.3) (102.4)

FY 13 (P)
1,459.4 173.0 79.0 (7.3) (812.1) (849.0)

Other Income Net (Pur)/Sale of assets/Capex Net (Pur)/Sale of Investments Cash from Investing

7.4 (324.7) (7.7) (325.0)

11.1 (346.3) 1.6 (333.6)

7.3 (913.3) (905.9)

7.3 (250.0) (242.7)

7.3 (250.0) (242.7)

Dividends & tax thereon Net borrowing Equity Issue Share premium Cash from Financing

260.5 260.5

(17.5) (535.0) 35.4 (517.0)

(58.3) 980.6 41.0 121.3 1,084.6

(109.9) (677.5) 13.4 77.9 (696.2)

(146.6) 721.2 574.6

Adjustments/Extra Income Cash flow

60.4 12.1

222.8 7.4

(162.3) 32.4

213.6

1,223.9

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Ratios:
Year-end: March
Per share values EPS (Rs) Cash EPS (Rs) DPS (Rs) Book Value (Rs) Sales per share (Rs) Valuations P/E (x) Cash P/E (x) P/B (x) P/S (x) Profitability/returns/liquidity EBIDTA Margin (%) NPM (%) ROCE (%) ROE (%) Debt/Equity Interest coverage Current ratio Other Ratios EV (Rs. Million) EBITDA (Rs. Million) EV/EBITDA EV/Turnover 2393.4 581.0 4.1 0.4 3444.5 815.3 4.2 0.6 8943.8 1232.7 7.3 1.1 13842.9 1744.2 7.9 1.3 13340.1 2465.0 5.4 0.9 12.6 3.1 19.6 18.6 2.2 2.1 2.4 15.0 5.7 28.9 26.8 1.1 3.8 2.0 17.1 7.7 27.3 31.7 1.2 5.9 2.2 19.3 9.5 36.2 33.3 0.6 9.2 2.1 20.4 10.3 36.0 33.8 0.6 9.5 2.4 2.3 1.3 0.4 0.1 5.6 4.0 1.5 0.3 10.2 7.7 3.2 0.8 12.3 9.9 4.1 1.2 8.4 7.2 2.9 0.9 48.5 89.2 0.0 261.3 1556.8 49.9 70.8 2.1 185.9 873.7 57.3 75.7 4.5 181.0 747.5 79.9 99.2 7.5 240.1 841.7 116.5 136.6 10.0 344.9 1132.0

FY 09

FY 10

FY 11

FY 12 (P)

FY 13 (P)

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Contact Details Institutional Relations

R F Jetha Malay Kampani

President, Institutional Operation Vice President - Institution

rfj@dalmiasec.com malay.kampani@dalmiasec.com

+912230272815-17 +919831246854

Dalmia Securities Private Limited

Ideal Plaza 11/1 Sarat Bose Road, Kolkata 700020 Phone No: 91-33-22806544-49, Fax No. 91-33-22806643 Website www.dalmiasec.com Khetan Bhavan, Flat No. 17, 2nd Floor, 198 Jamshedji Tata Road Churchgate, Mumbai 400020 Phone No: 91-22-30272815-17, Fax No 91-22-30272820

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